Our government policy makers seem to think the opposite is true. George Bushs' solution to our problems was to tell us to "go shopping". Later he tried to get everyone to go shopping by sending them a stimulus check. My mother put hers in the bank. She will put the next stimulus check she is getting in May--in the bank. She is 92 and lived through the "last" depression. Don't get me wrong, she still likes to buy new cloths and likes to go out and have fun on Friday night. But, at the age of 92 you tend to think like a squirrel and not like a rabbit.I ran across a really intriguing article by Paul Kasriel--Paradox Squared. Here is a snippet from the last paragraph of the article.
The most rapid real GDP growth we experienced in the 1951 through 2008 period occurred in the 1960s, a period when the consumption ratio was relatively low. My bet is that when we come out of this current deep recession (Q4:2009?), the recovery and expansion will be accompanied by a much lower consumption ratio than we have experienced in recent years and higher export and business capital spending ratios than we have experienced in recent years. But most importantly, I expect that these changing ratios will be accompanied by higher growth in real GDP ex federal government than we have experienced in recent years. Why? Because, as I stated at the outset, the pace of economic growth is a function of productivity and thrift. And no less an authority than the editor of Vogue says that thrift is in vogue again!I believe savings is in vogue right now. I also think savings leads to investment which leads to economic growth.
I wonder what Larry Kudlow would have to say about this?
To read the complete article--Paradox Squared--and see the accompanying chart go here. This is worth reading and considering. If nothing else it is pleasant to think there could be a light at the end of the tunnel.
That is my 92 year old mother, Dorothy, up there on the right. Looks pretty good for her age--don't you think?
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